In recent decades, Information Technology has contributed fundamentally to the development of financial markets, reforming the way in which financial institutions interact with each other. However, the established practices and norms of this sector may face an all-out overhaul as remarkable innovations such as Blockchain are maturing. The essence of Blockchain is that it is a public, shared and carefully designed record that allows mutually unknown individuals and institutions to share data in a reliable ledger and carry out all kinds of transactions. This ground-breaking technology is developed from cryptography and peer-to-peer network technologies. It is nearly immune to the majority of today's digital threats. Besides financial institutions, Blockchain based solutions have made it into other industries such as real estate, health care, the media as well as Government bodies. This paper will explain how Blockchain works, what it really is, types, its applications and threats and will offer a few ideas for prospective expansion of this technology.
Sergey Ivantsov, E. L. Sidorenko, Борис Спасенников, Yuri Berezkin · 5 authors
The authors have analyzed crimes connected with the use of virtual currency in the regional and international aspects. They introduce a new category of «cryptocrime» understood as the aggregate of publically dangerous acts, united by their common systemic characteristics, committed against or using the products of distributed registries (cryptocurrency, tokens and other forms of digital financial assets). They analyze each of the cryptocrime segments separately: illegal trade in psychoactive substances (narcotics, psychoactive substances, precursors), pornography and other prohibited content (including illegal services); laundering of criminal proceeds; theft of cryptocurrency and tokens. Using the scientific research methods (comparative, sociological, statistical analysis and extrapolation of data, building a trend line, etc.) the authors identify regularities in the dynamics of each type of cryptocrime as well as key factors facilitating them. The goal of the authors is to conduct a systemic examination of crimes committed against and using cryptocurrency and to determine the prospects of developing different segments of cryptocrime. To achieve this goal, they analyze qualitative and quantitative characteristics of illegal trade in narcotics and pornography, legalization of criminal proceeds and theft of digital assets. They name the anonymity of cryptocurrency as a factor facilitating illegal trade in drugs, while the growing scope of the legalization of criminal proceeds and theft is facilitated by the fact that cryptocurrency and tokens do not have a legal status as objects of civil law and objects of encroachments on property. The analysis allows the authors to conclude that without effective criminological measures the level of such crimes will continue to grow and may double by the end of 2019. According to the authors, the priority directions of international criminal policy in the sphere of cryptocrime prevention include determining cryptocurrencies’ legal status, licensing cryptocurrency trade (stock exchange services, exchange platforms, companies issuing tokens), setting international standards of counteracting the legalization of criminal proceeds and the financing of terrorism, creating a cryptocrime database.
Cryptocurrency such as bitcoin, Ethereum, and, more recently, Monero has become the currency of choice for many drug dealers and extortionists. The criminal activities extend to tax evasion, money laundering, Ponzi schemes, and the theft of cryptocurrencies to kidnapping for ransom. As the demand for cryptocurrencies increases, it provides opportunities for criminals to hide behind the presumed privacy and anonymity. Identifying these cryptocurrency-related crimes have posed challenges for law enforcement due to the cross-border nature of transactions, the use of evasion technology to mask the identity of users, and inconsistent regulations. To address the role of cryptocurrencies in criminal activities, the study focused on four research questions: (1) What role do cryptocurrencies such as bitcoin (BTC) play in criminal activities? (2) What factors facilitate cryptocurrency-related criminal activities? (3) What role do politics play in regulating cryptocurrencies? and (4) What are the challenges they pose for regulators and law enforcement? To answer the questions, the study utilized a systematic content review of the news reports, court cases, scholarly articles, online search engines, and commentaries relevant to regulations and reforms. The findings help to understand the current climate of virtual currencies, their use in criminal activities, and the complexities involved in regulating cryptocurrencies.
Mehrnoosh Mirtaheri, Sami Abu-El-Haija, Fred Morstatter, Greg Ver Steeg · 5 authors
Interest surrounding cryptocurrencies, digital or virtual currencies that are used as a medium for financial transactions, has grown tremendously in recent years. The anonymity surrounding these currencies makes investors particularly susceptible to fraud---such as ``pump and dump'' scams---where the goal is to artificially inflate the perceived worth of a currency, luring victims into investing before the fraudsters can sell their holdings. Because of the speed and relative anonymity offered by social platforms such as Twitter and Telegram, social media has become a preferred platform for scammers who wish to spread false hype about the cryptocurrency they are trying to pump. In this work we propose and evaluate a computational approach that can automatically identify pump and dump scams as they unfold by combining information across social media platforms. We also develop a multi-modal approach for predicting whether a particular pump attempt will succeed or not. Finally, we analyze the prevalence of bots in cryptocurrency related tweets, and observe a significant increase in bot activity during the pump attempts.
Abstract The purpose of this article is to determine the effectiveness of the Cybercrimes Bill of 2018 in investigating and prosecuting cryptocurrency crime. The method used to determine this enquiry is based on the analysis of certain criminal, procedural, and investigatory support provisions of the bill, accompanied by recommendations where necessary. An analysis of the Cybercrimes Bill of 2018 in its entirety falls outside the scope of this article. The significance of this enquiry rests on the increasing use of cryptocurrencies in criminal activity (including money laundering, investment scams, fraud, hacking, and cyber extortion). The investigation and prosecution of such criminal activity may be exacerbated by the unique characteristics inherent in a cryptocurrency; a cryptocurrency is an unregulated, online, encrypted (and thus pseudonymous) ‘currency’ denominated in its own units of value. Cryptocurrencies are thus an international online ‘currency’ with multijurisdictional presence. Any criminal activity associated with its use will therefore invariably possess a cyber-element. Such criminal activity will thus need to be addressed from a legal basis that caters for the criminal and procedural processes necessary in the investigation and subsequent prosecution of such crime.
Purpose The purpose of this paper is to show how global regulation of cryptocurrencies and other cybercurrencies can assist in addressing the challenges of attribution when investigating ransomware attacks and other types of cybercrime using these payment methods. Design/methodology/approach A literature review, looking at current academic research and discourse on the topic cryptocurrency regulation, is conducted to highlight current thinking and perceived difficulties in implanting a global regulatory framework. In addition, the research explores how governments have addressed the risks posed by cryptocurrencies and how regulation has been implemented. The research focuses on the regulatory approaches of Australia, Europe and the Americas to determine whether they could feasibly address the risks posed by cryptocurrencies and be implemented on a global scale. Findings To date, few sustained efforts have been made to regulate Bitcoin or other cybercurrencies. Where regulation has been introduced, it has often proven too costly to implement, thereby, stifling Bitcoin industry growth, or too ad hoc to function effectively. These regulatory pitfalls are substantiated by the continuing difficulty faced by law enforcement agencies, in identifying individual Bitcoin users and separating those that are using them for nefarious purposes from those that are using them for legitimate ones. These challenges appear to grow exponentially when it comes to prosecuting criminals for Bitcoin-related offences, due to the enormous lack of agreement within the justice system of most countries as to the appropriate legal definition for Bitcoin. This research highlights three characteristics that will be vital to the success of any global regulatory framework. These are consistency, clarity and cost-effective implementation. A regulatory framework for Bitcoin that lacks any one of these elements will fail to meet the requirements of every stakeholder in the regulatory process. A framework that is too costly to implement will stifle fintech innovation, subsequently depriving national economies of the multitude of potential benefits promised by fostering fintech entrepreneurship. Equally, a framework that is inconsistent will hamper the global cooperation necessary to combat Bitcoin-related crime. Originality/value This research evaluates research, discourse and regulatory responses from academic and governmental sources and discusses how a global response to cryptocurrency regulation will help address the growing problem of attribution when it comes to ransomware attacks, which has experienced a considerable spike in recent months.
Summary Blockchain technology has attracted considerable attention owing to its wide range of potential applications. It first appeared as a cryptocurrency, called Bitcoin, but has since been used in many other business and nonbusiness applications. Unlike most existing systems that are based on centralized frameworks, this new technology utilizes peer‐to‐peer networks and distributed systems which includes blockchain registers to store transactions. Its structure is designed as a digital log file and stored as a series of linked groups, called blocks. Each individual block is locked cryptographically with the previous block. Once a block has been added, it cannot be altered. Many security experts speculate that the inherent cryptographic nature of the blockchain system is sufficient to withstand constant hacking and security threats. However, previous studies on the security and privacy of blockchain technology have shown that many applications have fallen victim to successful cyberattacks. Owing to the increasing demand for cryptocurrency and its current security challenges, previous studies have not focused on blockchain technology cybersecurity vulnerabilities extensively. Here, our study extends upon the previous studies on vulnerabilities and investigates the types of potential attacks. Our study then provides further direction to highlight possible countermeasures against blockchain technology vulnerability to cybersecurity.
Bitcoin is the most prominent cryptocurrency that is frequently debated nowadays, basically defined as decentralised ‘currency’, ‘payment system’ and ‘investment tool’ which is an opportunity offered by today's digital age. In this article, we aim to fulfil the analysis of the legal basis of the matter from both technical and legal point of view. Despite there are many legal issues related to Bitcoin, we will particularly draw attention to some of the fundamental legal problems caused by the anonymity feature of the Bitcoin. Among these problems that may arise, only the disputes that may fall within the scope of the cases relating to debt and asset which have an impact on enforcement law will be examined. We will discuss the anonymity feature, considering the possibility of accessing an anonymous Bitcoin wallet. The article examines the situation where a debtor or one of the parties in a lawsuit may conceal their assets unfairly via Bitcoin (with the anonymity feature) in civil disputes relating to debt and assets. Has Bitcoin turned into a tool that malevolent debtors can hide their wealth while at the same time, a secret place where they can invest their money? In this study, we will offer solutions on overcoming the anonymity feature in practice and how to reveal and reach the wealth that are stored via Bitcoin wallet. Likewise, it will be underlined what malevolent debtors or parties in a lawsuit who want to obscure their wealth via Bitcoin wallet can do to strengthen their anonymity. Finally, we provide a specific and practical guideline for judges and especially creditor's lawyers in order to reduce the potential adverse situation that Bitcoin's anonymity feature can cause.
Hao Hua Sun Yin, Klaus Christian Langenheldt, Mikkel Alexander Harlev, Raghava Rao Mukkamala · 5 authors
Bitcoin is a cryptocurrency whose transactions are recorded on a distributed, openly accessible ledger. On the Bitcoin Blockchain, an owning entity’s real-world identity is hidden behind a pseudonym, a so-called address. Therefore, Bitcoin is widely assumed to provide a high degree of anonymity, which is a driver for its frequent use for illicit activities. This paper presents a novel approach for de-anonymizing the Bitcoin Blockchain by using Supervised Machine Learning to predict the type of yet-unidentified entities. We utilized a sample of 957 entities (with ≈385 million transactions), whose identity and type had been revealed, as training set data and built classifiers differentiating among 12 categories. Our main finding is that we can indeed predict the type of a yet-unidentified entity. Using the Gradient Boosting algorithm with default parameters, we achieve a mean cross-validation accuracy of 80.42% and F1-score of ≈79.64%. We show two examples, one where we predict on a set of 22 clusters that are suspected to be related to cybercriminal activities, and another where we classify 153,293 clusters to provide an estimation of the activity on the Bitcoin ecosystem. We discuss the potential applications of our method for organizational regulation and compliance, societal implications, outline study limitations, and propose future research directions. A prototype implementation of our method for organizational use is included in the appendix.
Cyber-attacks have become more sophisticated over recent years with the different configuration types and various industry sectors have suffered from a range of these different attack vectors resulting in some devastating outcomes. These have manifested in the shape of ransomware, malware, manipulation methods, phishing and spear-phishing. Whilst data breaches are a serious incident, in most organisations, there is a growing concern regarding attacks that are designed to have a more destructive effect such as the Ukraine cyber-attack in 2015 that resulted in a shutdown of the power grid. Or the WannaCry ransomware attack in 2017 that caused widespread chaos with healthcare institutions unable to carry out any tasks since access to data/systems was unavailable. These critical national infrastructure (CNI) attacks into sectors such as healthcare cause data breaches/disruptions and are also able to leverage vulnerabilities in the industrial processes containing ICS and SCADA systems. Perhaps the state sponsored cyber-attacks cause the most concern as they tend to be at the more sophisticated level of the spectrum and maximize on amount of potential harm that is delivered. There is growing interest in how to protect CNI besides just using traditional methods such as regular patching, Intrusion Detection and Prevention systems (IDPS), up to date compliance policies, etc., and blockchain can be the mechanism that gives another protection layer to protect mission critical data. Blockchain, a decentralized network, offers the features of immutability, non-tampering, security encryption, auditability, and can be a permissioned type of environment where the set of users are invited and not open for all. Blockchain can complement these traditional systems by offering another layer of protection to the sensitive and mission critical data.
Jesús Canelón, Esperanza Huerta, José Incera, Instituto Tecnológico Autónomo de México, Mexico · 5 authors
This paper proposes a cybersecurity control framework for blockchain ecosystems, drawing from risks identified in the practitioner and academic literature. The framework identifies thirteen risks for blockchain implementations, ten common to other information systems and three risks specific to blockchains: centralization of computing power, transaction malleability, and flawed or malicious smart contracts. It also proposes controls to mitigate the risks identified; some were identified in the literature and some are new. Controls that apply to all types of information systems are adapted to the different components of the blockchain ecosystem.
The transparent and immutable nature of blockchain provides incentives for organizations wishing to create and implement an open, decentralized governance structure. As members exercise their voting rights, a fault-tolerant record accumulates on the blockchain that can be analyzed to diagnose and intercept potential threats to the governing body. To date, there has not been a systematic study of on-chain governance with respect to voting. In this paper, we provide an analysis of blockchain governance through a case study of the first cryptocurrency to adopt on-chain voting, Dash. Our analysis introduces the key characteristics of blockchain governance, steps through a data-driven exploration of Dash's on-chain voting system, and highlights exploitable attack vectors and vulnerabilities for the subversion of Dash's on-chain voting system via a novel network analysis methodology. We then conclude with guidelines for other organizations looking to implement similar blockchain governance solutions while maintaining integrity in their operations.
(english) This thesis deals with cybercriminality in area of cryptocurrencies. The thesis first of all describes basic terms, sources of law and issues of jurisdictions in area. Furthermore it deals with delineation of selected crimes commited in connection with cryptocurrencies. Part of the thesis focuses on issues with anonymity and proving. Key words Cybercriminality, Cryptocurrencies, Computer Criminality
The purpose of this research is to demonstrate how public blockchains offer a greater degree of censorship resistance over traditional web-based information broadcasting mechanisms, and a comparison of existing options. Public blockchains present a means to mitigate censorship from nation states through both a broadcasting and data storage mechanism. They are costly to attack and difficult to remove from the public due to their distributed and accessible nature. A recent incident in China proved the worth of public blockchains by forcing the distribution of a censored letter describing harassment by Peking University into an Ethereum transaction by an anonymous individual or party. The Chinese government censored the letter on popular centralized services such as WeChat, but was unable to censor it once posted to the Ethereum blockchain. Through the demonstration of the letter’s presence on Ethereum as well as the act of placing it on other public blockchains, this research highlights the importance of how public blockchains will continue to be a vessel for the protection of information well into the future.
Kateryna Chyzhmar, Olеks, r Yunin, Iryna Paterylo · 6 authors
In the course of the study, cases of interaction of a cryptocurrency system with external subjects were identified. Such connections are manifested mainly in the protection of rights of participants in the cryptocurrency market in the event of an offense, respectively, the issue of punishment of offenders, taxation issues, as well as the performance of the cryptocurrency as a medium of circulation outside the cryptocurrency market. Due to the misregulating of the algorithm of such relationships at the legislative level, many violations of the rights and interests of both the participants of the cryptocurrency market and these very external actors arise. The way to resolve problematic issues is to develop a legislative framework. First, since each state at the national level regulates the process of cryptocurrency circulation in its own way, and the cryptocurrency market covers the whole world, it becomes necessary to establish common rules, as well as to develop a conceptual and categorical apparatus at the international level. Such an act can even be documented as a legal custom, such as IncotermsNÂÂÂ After determining the main points regarding the circulation of cryptocurrency in the world at the international level, each state will be able to develop norms at the level of national legislation on some basis. Today it is very important to realize that the emergence of a cryptocurrency (digital money) is a globalization phenomenon. Cryptocurrency is a class of financial assets that is developing and gains popularity more quickly than others and is both a prospect and a threat to the entire global financial system. Therefore, it is necessary to take control of this phenomenon in advance in order to be ready for its appearance in the financial markets.
'It has the capacity to change everything - the way we work, the way we learn and play, even, maybe, the way we sleep or have sex,' wrote British entrepreneur and author Matt Symonds of his prediction for the internet in The 'Economist' in 1999. 'Within a few years, the internet will turn business upside down. Be prepared - or die.'